Deputy Commissioner of Income tax, Pune V. Mukund Bhavan Trust, Pune

ITA 373/PUN/2017

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7140 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 12-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 12; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.373/PUN/2017 िनधा रण वष / Assessment Year : 2007-08 DCIT (Exemption), Circle, Pune Vs. Shri Mukund Bhavan Trust, 1105, Raviwar Peth, Pune – 411 002 PAN : AAATS5107R Appellant Respondent आदेश / ORDER This appeal by the Revenue is directed against the order passed by the CIT(A)-10, Pune on 09-11-2016 in relation to the Assessment Year 2007-08. 2. The only grievance projected by the Revenue through various grounds is against holding the notice u/s.148 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) by the ld. CIT(A) as bad in law. 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year under consideration on 22-08-2007 declaring total income at Rs.4,43,56,710/-. The assessment was completed u/s.143(3) of the Act on 31-12-2008 Assessee by Shri V.L. Jain Revenue by Shri J.P. Chandrakar Date of hearing 30-11-2021 Date of pronouncement 01-12-2021 ITA No.373/PUN/2017 Shri Mukund Bhavan Trust 2 accepting the returned income. Thereafter, the AO initiated the re- assessment proceedings by means of a notice u/s.148 opining that the assessee violated provisions of section 13(1)(c)(ii) and 13(2)(b) of the Act. The assessee furnished explanation to the effect that there was no violation. The AO noticed that the assessment proceedings for the assessment years 2010-11 and 2011-12 transpired that the assessee charged rent from letting out Shop Nos. 2, 3 and 4 of the ground floor to one of the trustees on a nominal rent ranging from Rs.2.1 to Rs.2.73 per sq.ft. as against rent charged from Bank of Maharashtra at Rs.23.44 per sq.ft. and also from a third party at Rs.4.25 per sq.ft. Invoking the provisions of section 13, the AO denied the exemption u/s.11 allowed to the assessee and resultantly computed the total income at Rs.26,73,33,600/-. The ld. CIT(A) quashed the assessment by observing that no material was gathered by the AO for the year under consideration that was not disclosed by the assessee in the original assessment proceedings and hence, the initiation of re- assessment proceedings, after four years from the end of the relevant assessment year, was bad in law as the assessment was ITA No.373/PUN/2017 Shri Mukund Bhavan Trust 3 already completed u/s.143(3) of the Act. Aggrieved thereby, the Revenue has come up in appeal before the Tribunal. 4. We have heard the rival submissions and gone through the relevant material on record. Admittedly, the assessment in this case was originally completed u/s.143(3) of the Act on 31-12-2008. The initiation of re-assessment proceedings by means of a notice u/s.148 of the Act has taken place by virtue of a notice issued to the assessee on 31-03-2014. Following reasons were recorded for reopening the assessment, as have also been reproduced on page 1 of the assessment order : “It was observed during the assessment proceedings for A.Y. 2010-11 and 2011-12 that assessee has let out three shops, Shop No.2, 3 & 4 of the ground floor of the building owned by the assessee Mukund Bhawan Trust situated at 1105, Raviwar Peth, Pune to Mr. Purushottam Lohiya (one of the trustee). Some shops and office of same building has also been let out to other tenants by Mukung Bhawan Trust. It is seen that the assessee trust has violated the provisions of section 13(1)(c)(ii) and 13(2)(b) of the I.T. Act, 1961. Under these circumstances, exemption of the trust enjoyed u/s.11 and 12 becomes non applicable as there is gross violation of section 13 of the Act. In view of the above, I have reason to believe that there is an escapement of an income u/s.147 of the I.T. Act, 1961.” 5. On going through the above reasons, it becomes evident that the AO in the first sentence is referring to the assessment proceedings for the assessment years 2010-11 and 2011-12 ITA No.373/PUN/2017 Shri Mukund Bhavan Trust 4 revealing the letting out of three shops on the ground floor of the building to one of the trustees. The second line talks of letting out shops to other tenants by the assessee trust. Thereafter, in the next line, he says that “It is seen that the assessee trust has violated the provisions of section 13(1)(c)(ii) and 13(2)(b) of the I.T. Act, 1961.” It is on the basis of the above lines, that the AO held that the exemption u/ss.11 and 12 was not available to the assessee because of the gross violation of the provisions of section 13 of the Act. The crucial line as reproduced above talks of the assessee trust violating the provisions of section 13(1)(c)(ii) and 13(2)(b) of the Act. Impliedly, this refers to the assessment year under consideration, though it is not categorically stated. In the initial line, there is reference to the assessment proceedings taking place for the assessment years 2010-11 and 2011-12 divulging the fact of letting out of the three shops to one of the trustees. Firstly, there is no reference in the reasons as to whether such or similar shops were let out to the trustee for the year under consideration. Secondly, the reasons do not indicate in any manner that the assessee failed to disclose such fact in the return or during the assessment, completed u/s.143(3) of the Act. Proviso to section ITA No.373/PUN/2017 Shri Mukund Bhavan Trust 5 147 states that where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. To put it simply, the condition precedent for taking action u/s.147 after four years from the end of the relevant assessment year where the original assessment was completed u/s.143(3), is that there must be failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It is only when there is such a failure on the part of the assessee and further the reasons recorded by the AO for initiating the re-assessment proceedings refer to such fact of the failure that a valid initiation of re-assessment can take place. We are confronted with a situation in which the original assessment was completed u/s.143(3). Period of four years from the end of the relevant assessment year 2007-08 under consideration expires on 31-03-2012. Notice u/s.148 in this case was issued on 31-03-2014. As the proviso to section 147 is ITA No.373/PUN/2017 Shri Mukund Bhavan Trust 6 attracted in this case and the reasons recorded by the AO do not refer to any failure on the part of the assessee to disclose fully and truly all material facts necessary for reassessment, we are satisfied that the ld. CIT(A) committed no mistake in setting aside the re- assessment on this preliminary legal score. We, therefore, uphold the impugned order. 6. In the result, the appeal is dismissed. Order pronounced in the Open Court on 01 st December, 2021 Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दनांक Dated : 01 st December, 2021 Satish आदेश आदेशआदेश आदेश क क क क ितिलिप ितिलिप ितिलिप ितिलिप अ ेिषत अ ेिषतअ ेिषत अ ेिषत / Copy of the Order is forwarded to : 1. अपीलाथ / The Appellant; 2. यथ / The Respondent; 3. आयकर आयु (अपील) / The CIT (Appeals)-10, Pune 4. The CIT (Exemptions), Pune 5. DR, ITAT, A Bench, Pune ; 6. गाड फाईल / Guard file. // True copy // आदेशानुसार आदेशानुसारआदेशानुसार आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA No.373/PUN/2017 Shri Mukund Bhavan Trust 7 Date 1. Draft dictated on 30-11-2021 Sr.PS 2. Draft placed before author 01-12-2021 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *